As we can see, Freddie Mac, Fannie Mae, and the Mortgage Bankers Association all believe homes sales will increase steadily over the next year. If you’re a homeowner who has considered selling your house recently, now may be the best time to put it on the market.
Low Mortgage Rates, Strong Labor Market Fueling Housing Market
The recent decline in mortgage rates stem from the on-going global trade disputes and weakening global economy, which have led to a drop in long term interest rates in most countries. Despite the negative impacts of trade and the deteriorating global economy, the domestic U.S. economy continues to grow and the three-year low in mortgage rates has poised housing to reaccelerate.
As a result, we expect a significant increase in refinance originations in upcoming quarters. Going forward, the combination of low mortgage rates, a tight labor market, and strong consumer confidence will offset declining business sentiment. These factors will set the stage for continued improvement in the housing market heading into the fall.
The lasting impact of trade tensions will have some visible impact on the second half of 2019 and early 2020. Without the short-term effects of tax cuts and fiscal stimulus we saw in 2018, for the full year 2019, we forecast slower growth of 2.2%, and further decelerating to 1.8% in 2020.
The declining trend in gasoline prices as well as wage stagnation lead us to predict that consumer price inflation will remain at 2.4% and 2.3% in the third and fourth quarters of 2019, respectively. Our yearly consumer price down to 2.0% in 2020. forecast remains unchanged at 2.1% in 2019, before edging down to 2.0% in 2020.
Economic & Housing Research Forecast
Despite fears of an economic slowdown, the U.S. labor market stands firm. Unemployment claims are approaching their lowest levels since the early 1970’s. Job openings also remain higher than unemployment claims for an impressive sixteen consecutive months. There has been little change in workers’ willingness to change jobs, while at the same time, businesses are holding on to their current workforce in a tight labor market. This continued strength in the labor market supports our forecast of a strong unemployment rate of 3.7% in the third and fourth quarters of 2019. Our full year 2019 forecast remains at 3.7%, before modestly increasing to 3.8% in 2020.
Mortgage rates to remain low for foreseeable future
Over the past few months, the increased global uncertainty has put downward pressure on interest rates. Long-term government bond yields around the world have plummeted, dropping below zero in many European countries. Denmark, one of the few countries outside of the United States with a 30-year fixed-rate mortgage, saw its mortgage rate fall as low as 0.5%. While we are not projecting the 30-year fixed-rate mortgage in the United States to come anywhere close to that rate anytime soon, the mortgage rate trend in Denmark provides an example of the enormous downward pressure on long-term interest rates around the world. Thus, we have adjusted our quarterly forecast for the 30-year fixed-rate mortgage to remain around 3.6% through the second quarter of 2020. We project the annual average to be 3.9% in 2019, before sinking to 3.7% in 2020.
MBA Forecasts and Commentary
The market environment changes frequently. MBA’s highly regarded economists provide current economic data that factor into industry business decisions on a daily basis. Our forecasts and commentary help you better understand and analyze different trends and changes in the industry – past and present – to strategize for the future.
“Since hitting a recent high of over 5 percent in November 2018, the 30 year fixed mortgage rate has fallen more than a percentage point, and homeowners have responded strongly to the drop in rates, as more borrowers are now “in the money” and have a rate incentive to refinance. In the second quarter alone, refinance applications increased 30 percent from the first quarter and in the first two weeks of August, refinance applications surged another 50 percent…” – Mike Fratantoni, Chief Economist, MBA
Article & Photo courtesy of Alston Homes 9/9/2019